Last week a leaked
memo from a consultant working with the SCO Group and posted on the
Open Source Initiative site, gave many Linux conspiracy theorists ammunition
for a long held belief that Microsoft was underwriting SCO's legal battles
involving UNIX and Linux.

The leaked memo
is from Michael Anderer, CEO of venture firm S2 Partners, to Chris Sontag,
SCO's vice president and is dated October 12, 2003. Open Source Initiative
claims the memo was leaked by a whistle-blowing employee within SCO.

Anderer says in
the memo, "I realize the last negotiations are not as much fun,but
Microsoft will have brought in (US)$86 million for us, including BayStar.
The next deal we should be able to get from $16-20 ..."

Many have suspected
that Microsoft has been the force behind SCO's UNIX / Linux-related
legal actions, because Microsoft sees Linux as a competitive threat.

Both SCO and Microsoft
deny working together against Linux. SCO maintains that its lawsuit
against IBM -- and now Linux users AutoZone and DaimlerChrysler -- is
necessary to protect its intellectual property.

Microsoft has publicly
acknowledged that it has licensed SCO's intellectual property, but says
it has not otherwise invested in SCO. No denials of the legal funding
or the leaked memo as yet have been made by Microsoft.

The leaked memo suggests
otherwise. BayStar Capital, referred to in the memo as a conduit for SCO
funding, is a venture capitol firm. BayStar has invested $50 million in
SCO. And Vulcan Capital, the investment firm founded by Microsoft co-founder
Paul Allen, has invested heavily in BayStar. Allen continues to be the
second-largest Microsoft share owner, after Bill Gates

"Microsoft also
indicated there was a lot more money out there, and they would clearly
rather use BayStar 'like' entities to help us get [significantly] more
money if we want to grow further or do acquisitions," Anderer states
in the memo. Anderer, head of venture firm S2 Partners, facilitates outside
investment in SCO.

"We believe the
e-mail was simply a misunderstanding of the facts by an outside consultant
who was working on a specific unrelated project to the BayStar transaction,
and he was told at the time of his misunderstanding," SCO spokesperson
Blake
Stowell told NewsFactor. Furthermore, Microsoft did not participate in
or orchestrate the BayStar investment, he said.